EBA report threatens loose AT1 language

Author: Ben Bschor | Published: 30 Oct 2014

A European Banking Authority (EBA) monitoring report on additional tier 1 (AT1) instruments could result in less future-proof language in deals.

The document, published on October 8, had been expected by the legal community for some time. It has only preliminary status and the regulator acknowledges that the paper is not fully comprehensive.

The report, which was also welcomed as providing clarity in some areas, was based on analysis of the terms and conditions (T&Cs) of nine AT1s, issued between August 2013 and May 2014. The EBA did not specify which deals were examined beyond stating that three of the deals were made under a conversion mechanism and six under a temporary write-down mechanism. An EBA spokesperson refused to give further details.

The document lists concerns and clarifications with regards to the interpretation of the CRR and supplementary regulatory technical standards (RTS) dealing with AT1 instruments. It...